Greater Metro Denver Update May 2016 Megan Aller Account Manager MAller@ltgc.com 720-243-2221
Areas of Analysis THE REQUIRED STUFF Reporting on the 7 Metro Denver Counties: Adams, Arapahoe, Broomfield, Denver, Douglas, Elbert, Jefferson Our numbers will vary from DMAR and REcolorado updates due to variations on geographical areas covered.
THE HIGHLIGHT REEL Denver Real Estate looks like the snake who ate an elephant. Detached single family active units increased again to 4,339 available homes for sale which is a gain of +13.6% over the previous month. Attached single family also reported a 4.0% increase of new units from April bringing the count to 1,154. Both markets together represent 5,493 units for sale. Average sold price climbed to new records for DSF at $451,429, and ASF in at $297,697. 6,004 homes were placed under contract. A balanced market with a 6 month supply of inventory would require 36,024 active units. Average days on market are higher this year due to many contracts cancelling, 28 DOM for DSF and 29 for ASF. This increase is a welcome change for Buyers. 60% of DSF and 68.8% of ASF homes were under contract in 7 days or less, which caused 65% of homes to sell for at or over their asking price.
HOT TOPIC What to expect through Summer 2016 (We need to flash back to flash forward)
HOT TOPIC Remember the lag in reporting numbers? To have an accurate view of market conditions for active listings in June and July we need to review closed data for August. Average time from contract to closing is 30-45 days, so active listings entering the market now will likely close just before school starts.
HOT TOPIC HOT TOPIC graphs will appear after each reporting section in this month s edition of The Greater Metro Denver Update, please pay close attention to the title on each graph and section to be clear on current vs. future conditions.
MARKET BASICS DSF With increasing prices, many consumers are nervous about a bubble. The active line in green displays the significant difference in units from where the bubble was formed versus current market conditions.
MARKET BASICS DSF MOM A: +13.6% U/C: +14.1% S: +14.5% YOY A: +6.2% U/C: +1.8% S: -1.1% Low A: 2,272 (Mar 2015) U/C:1,971 (Dec 2013) S: 1,770 (Feb 2011) High A: 23,442 (Jun 2006) U/C: 5,865(Jun 2013) S: 4,857 (Jul 2013) Historical Avg A: 12,444 U/C: 3,747 S: 3,014 Anticipated Trend A: Slow gains through July U/C: Sharp increase, slowing in August. S: Will follow the under contract trend.
MARKET BASICS- HOT TOPIC DSF As we enter warmer months active inventory continues to climb while under contract and sold units begin to taper off which gives the feeling of a slowing in the marketplace. While the slight easing in the marketplace is felt now, numbers will not reflect this shift until August. Sellers will need to price in the market instead of over the market to adjust for less Buyer activity.
MARKET BASICS ASF With increasing prices, many consumers are nervous about a bubble. The active line in green displays the significant difference in units from where the bubble was formed versus current market conditions.
MARKET BASICS ASF MOM A: +4.0% U/C: +13.5% S: +9.5% YOY A: +7.5% U/C: -8.6% S: -2.6% Low A: 758 (Mar 2015) U/C: 421 (Nov 2007) S: 432 (Jan 2011) High A: 8,760 (Jun 2006) U/C:1,813 (Jun 2015) S: 1,686 (Jul 2015) Historical Avg A: 3,806 U/C: 1,075 S: 894 Anticipated Trend A: Slow gains through July U/C: Sharp increase, slowing in August. S: Will follow the under contract trend.
MARKET BASICS- HOT TOPIC ASF As we enter warmer months active inventory continues to climb while under contract and sold units begin to taper off which gives the feeling of a slowing in the marketplace. While the slight easing in the marketplace is felt now, numbers will not reflect this shift until August. Sellers will need to price in the market instead of over the market to adjust for less Buyer activity.
INVENTORY DSF MOM: -0.8%% YOY: +7.4% Historical Avg: 4 Low: 1 (Dec 2015) High: 8.1 (Feb 2008) Anticipated Trend: Decrease and hold low through June Currently sits at 1.3 months Buyers should be encouraged by this number increasing over last year. This number remains flat as we hit the peak of activity at the beginning of summer.
INVENTORY-HOT TOPIC DSF May and June typically report the lowest ratio of Buyers to Sellers in the last 3 years. Inventory climbs as weather heats up, creating the feeling of a lull in the marketplace. The ratio of homes to Buyers in the market shifts by 60% from June to August in the favor of Buyers.
INVENTORY DSF The under $400,000 market is fueled by the two largest portions of our demographics; Millenials and Baby Boomers. These markets will remain competitive for Buyers. Move up Buyers will have a great opportunity to sell high and face less competition at higher price points.
INVENTORY DSF There is a true under supply of detached homes at all price points. Minimal development anticipated in 2016 will force this market to remain competitive.
INVENTORY ASF MOM: -5.1% YOY: +10.4% Historical Avg: 5 Low: 0.7 (Dec 2015) High: 10.7 (Jan 2006) Anticipated Trend: Will remain around 3 weeks to 1 month through summer. Currently at 0.8 months of inventory. The Denver attached market will remain highly competitive for Buyers until a resolution is made in regards to builder defect regulations. Similar to the detached market, a slight tipping of the scales from the same time last year in their favor as more listings enter the market.
INVENTORY-HOT TOPIC ASF November historically reported the lowest ratio of Buyers to Sellers in the last 3 years. Second lowest month was May. Inventory climbs as weather heats up, creating the feeling of a lull in the marketplace. The ratio of homes to Buyers in the market shifts by 25% from June to August in the favor of Buyers. Seasonality has a smaller impact on attached single family over detached single family due to no development.
INVENTORY ASF The under $400,000 markets are anticipated to remain strong for the foreseeable future. Luxury markets are highly dependent on location and condition. Numbers are very volatile due to only a few transactions.
INVENTORY ASF Greater Metro Denver is a market fueled by wealth and not credit. As long as migration to Colorado remains strong and development below new household formation, we will remain in an inventory crunch.
PRICING DSF MOM: +2.4% YOY: +7.6% Historical Avg: $315,872 Low: $230,878 (Jan 2009) High: $451,429 (May 2016) Anticipated Trend: Steady gains of 8-12% from previous year. New record of $451,429. As projected last year, with minimal gains in inventory with continued record levels of migration this number continues to climb.
PRICING- HOT TOPIC DSF The herd mentality takes effect on sellers trying to hop on the bandwagon at the end of the summer months hoping to get the same price gains shown in spring months. Month-over-month price gains slow down due to less Buyer activity and increased listings starting in June through September. Sellers will need to focus on pricing in the market than over the market.
PRICING ASF MOM: +4.2% YOY: +13.7% Historical Avg: $190,853 Low: $138,239 (Feb 2009) High: $297,697 (May 2016) Currently sits at $297,697 Considering such a strong Sellers market with no end in the immediate future, as expected this number climbed to near $300,000. Anticipated Trend: Until inventory makes larger gains appreciation will continue.
PRICING- HOT TOPIC ASF The herd mentality takes effect on sellers trying to hop on the bandwagon at the end of the summer months hoping to get the same price gains shown in spring months. Month-over-month price gains slow down due to less Buyer activity and increased listings starting in June through September. Sellers will need to focus on pricing in the market than over the market.
ASF + DSF PRICING: GETTING IT RIGHT The market remains hot in May with many homes selling very quickly. For homes on the market 2 weekends or longer, it may be time to consider a price reduction.
PRICING ASF + DSF Multiple offers and bidding wars are at record levels due to the effects of market compression from February through May. These escalated values will continue to climb through the mid summer months.
DISTRESSED MARKET DSF MOM: 0% YOY: -1% Historical Avg: 17% Low: 1% (May 2016) High: 41% (Mar 2011) Anticipated Trend: Remain low to nonexistent as migration to Denver remains strong pushing sales prices higher. Currently sits at 1% Buyers hopeful of finding a home below market value. They will find that through the spring months, bidding wars will push values back to fair market prices or higher.
DISTRESSED MARKET ASF MOM: 0% YOY: -1% Historical Avg: 20% Low: 0% (May 2015) High: 51% (Jan 2011) Anticipated Trend: Remain low to nonexistent as migration to Denver remains strong pushing sales prices higher. Currently sits at 0%, a total of 2 condo short sales, 1 REO and 1 HUD in May 2016. Buyers hopeful of finding a home below market value. They will find that through the spring months, bidding wars will push values back to fair market prices or higher.
THE SPEED OF THE MARKET ASF + DSF MOM: +0.2% YOY: -3.2% Historical Avg: 28.8% Low: 5.3% (Dec 2010) High: 65.9% (May 2015) Anticipated Trend: Peaking in May/June as more inventory enters the market this number will cool. Currently at 62.7% Based on the last 3 years, we expect this number to accelerate through the spring, May is one of the fastest selling months in this real estate cycle. We will begin to see this number decrease as we enter the summer months.
THE SPEED OF THE MARKET DSF MOM: -9.7% YOY: +40.0% Historical Avg: 78 Low: 18 (Jul 2015) High: 125 (Feb 2007) Anticipated Trend: May hold around 25-30 with increase in new units. Currently at 28 days to contract. With many Buyers and Sellers digging in their heels properties are hitting the market for a second time increasing this measurement.
PRICING- HOT TOPIC DSF Keep in mind the reporting delay of 30-60 days, lowest days on market are reported in June and July, which means those properties were likely active in May and early June. Sellers who wait to list in July may feel as though it s taking longer to sell even though it s likely new records for days on market are being reported. July s Buyer activity is slightly lighter due to holiday weekend.
THE SPEED OF THE MARKET DSF Immense pressure on the under $400,000 market with decreasing days on market at higher price points.
THE SPEED OF THE MARKET ASF MOM: -3.3% YOY: +123.1% Historical Avg: 82 Low: 13 (Jul 2015) High: 133 (Jan 2006) Currently at 29, up from 20 days in April 2016. Similar to the detached market, this number is up due to 25% of transactions falling apart and then going back under contract. Anticipated Trend: May begins to show signs of slowing, slow gains through summer.
PRICING- HOT TOPIC ASF Keep in mind the reporting delay of 30-60 days, lowest days on market are reported in June and July, which means those properties were likely active in May and early June. Sellers who wait to list in July may feel as though it s taking longer to sell even though it s likely new records for days on market are being reported. July s buyer activity is slightly lighter due to holiday weekend.
THE SPEED OF THE MARKET ASF Immense pressure on the under $400,000 market.
ODDS OF SELLING A calculation based on all active, under contract, sold and expired listings in the market place This number is used to predict the likelihood of a Buyer and Seller agreeing to exchange property in a specific month. This number is not what people expect it to be, even in a hot market, some homes do not sell.
ODDS OF SELLING DSF MOM : +0.1% YOY: -1.3% Historical Avg: 38% Low: 20.7% (Jan 2011) High: 70.7% (Mar 2015) Anticipated Trend: Peak in May and will cool through the winter months. Currently sits at 64.3%. The odds of selling will remain high for homes listed prior to the middle of summer. Those late to jump on the bandwagon may have to correct prices due to waning market activity later in the year.
DSF May 2016 ODDS OF SELLING- HOT TOPIC Again, decreased Buyer activity and increased listings lower the odds of selling towards the end of the summer months. While the odds of selling decreases as the school year draws near, odd are still at near record levels.
ODDS OF SELLING DSF Highest rates of transactions selling are in the under $400,000 markets. The trend is clear again that move up Buyers have prime conditions to work with through the Summer of 2016.
ODDS OF SELLING ASF MOM: +1.5% YOY: -2.6% Historical Avg: 39.1% Low: 16.1% (Dec 2006) High: 77.3% (Mar 2015) Anticipated Trend: Slow consistent increase until new units are developed and released into the market. Currently sits at 72.3% Minimal development prohibiting introduction of new units to the attached market. This will continue to fuel the market.
DSF May 2016 ODDS OF SELLING- HOT TOPIC Again, decreased Buyer activity and increased listings lower the odds of selling towards the end of the summer months. While the odds of selling decreases as the school year draws near, odd are still at near record levels.
ODDS OF SELLING ASF Again odds are very favorable and more homes than not to sell in the first 30 days for attached dwellings up to $600,000.
CLOSED TRANSACTIONS DSF 2016 is already starting off with accelerated sales. However May reported a slight decline year over year, down -1.08%, still up 5.03%.
CLOSED TRANSACTIONS ASF Attached markets continue to gain over previous years, for year to date numbers but were down slightly May 2015 vs. May 2016.
The END Thank you!